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Banks' classified loans fall slightly
Siddique Islam
12/26/2005
Classified loans of the country's banking sector have slightly declined as the central bank enforced strict monitoring and due to the impact of the existing Money Loan Court Act.
The share of gross classified loans dropped to 15.34 per cent in September this year while the net non-performing loans came down to 8.07 per cent in the banking sector.
The ratio of gross non-performing loans (NPLs) in the total outstanding loans of the banking sector dropped by 0.46 per cent during the first quarter of the current fiscal while the net classified loans declined by 0.04 per cent.
The new revised Money Loan Court Act, billed as more creditor friendly, should substantially improve the recovery of defaulted loans, sources in the banking sector said.
A similar revision of Bankruptcy Act will facilitate reasonably quick and orderly exit of insolvent business, he added.
"The revised Money Loan Court Act tremendously helps us to recover default loans," a top official of a commercial bank told the FE. The amount of classified loan will decline further in the near future, he added.
A comparative analysis of the banks between June 31, 2005 and September 30, 2005 shows that performance of the nationalised commercial banks (NCBs) deteriorated while the private commercial banks (PCBs) improved.
According to the Bangladesh Bank (BB) provisional figures, the share of the gross classified loans stood at 15.34 per cent of the total outstanding loans distributed at the end of September 2005, which was 15.8 per cent at the end of June 2005.
The gross amount of defaulted loans in the banking sector, which was Tk 184.43 billion on June 30, 2005, stood at Tk 186.47 billion at the end of September this year.
However, the banks deduct provisions, the amount preserved against classified loans, and 'interest suspense' from the outstanding amount to calculate the net amount of non-performing loans.
The net amount of non-performing loans at the end of September stood at Tk 90.33 billion, which was 8.07 per cent of the total outstanding loans.
As of June 30, 2005, the share of net defaulted loans was 8.11 per cent, which was lower than 9.79 per cent and 8.64 per cent respectively in December 2004 and March 2005 respectively, sources in the central bank said.
According to the statistics, the gross classified loans of the four NCBs, however, recorded a 24.47 per cent rise in September 30 this year against 22.1 per cent at the end of June 2005.
The defaulted loans of the NCBs have increased by 2.37 percentage points, pushing up the total classified amount to Tk 107.31 billion in September last against Tk 102.66 billion in the end of June 2005.
"The volume of classified loan of the NCBs will come down by the end of this calendar year," a senior official of a NCB told the FE Sunday. Most of the NCBs have already taken special care to recover default loans from their top 20 defaulters, he added.
The NCBs also heavily lagged in keeping provisions against bad debt with a shortfall of Tk 41.21 billion at the end of September 2005 while most of the PCBs and foreign commercial banks (FCBs) are in comfortable position.
The gross classified loans of the PCBs came down to 7.02 per cent in September from 7.76 per cent in June 2005. The gross classified loans of FCBs stood at Tk 1.10 billion at the end of September, which was 1.41 per cent of the total outstanding loans.
The development financial institutions' (DFIs) gross classified loans declined to 34.62 per cent on September 30 from 35.2 per cent at the end of June 2005.
The gross classified loans of the five DFIs amounted to Tk 36.53 billion at the end of September, lower than Tk 37.40 billion at the end of June last.
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